US envoy says Japan may be risking trade wars

By
Peter Grier, Business correspondent of The Christian Science Monitor /
April 23, 1982

Washington

Much of the world is fast losing patience with Japan's trade policies. Taiwan has already banned some 1,500 Japanese consumer items. French President Francois Mitterrand jetted into Tokyo last week -- and zoomed away without hoped-for trade concessions. A frustrated US Congress is toying with potentially protectionist trade legislation.

Since December, the Japanese have speeded up tariff reductions and announced the chopping down of 67 nontariff barriers to foreign goods. But trade partners grumble that these moves are trivial. Will the Japanese make further concessions , before trade doors begin to swing shut around the globe?

''I do know the Japanese view the initiatives taken to date as part of a continuum, and have tried very hard to see what additional steps can be taken to resolve the problem,'' says US Special Trade Representative Bill Brock. ''A number of members of the Japanese government are very serious about that effort. When and under what circumstances and with what content they will act, I don't know. I hope it's soon.''

In an interview with the Monitor, Mr. Brock said Japan's intransigence could have a crunching effect on all world trade if change doesn't come quickly.

''I think the consequences could be very dangerous in trade terms,'' Mr. Brock said. ''What specifically might happen I don't know. Congress could take a series of negative steps. The European Community might do likewise. A trade war between any two parties tends to spread. I think that would be an act of international insanity. It just cannot happen. We've got to find ways to solve the problem politically.''

Interviewed in his suite overlooking the Old Executive Office Building, with a large portrait of Teddy Roosevelt staring firmly over his shoulder, the special trade representative touched briefly on a number of problematic trade issues.

Japan - One specific charge leveled at the Japanese is that they have a skewed financial system, with an undervalued yen keeping exports cheap, and a capital market shuttered to foreigners, keeping potential importers out.

Mr. Brock says he believes the yen is, indeed, undervalued. He suggests that Japan allow American companies to borrow yen for domestic or international purposes -- though, in the short run, that might exacerbate the yen-dollar exchange rate problem.

''Perhaps of more importance would be a more active willingness to allow US investment in Japan, just as freely as we allow it here,'' Mr. Brock said. ''I think the free flow of capital is essential to a healthy trading relationship.''

He also allowed that there is more than a grain of truth in the Japanese charge that US companies are crybabies who can't compete.

''Too many companies have read the headlines and decided not to even try,'' he said. ''Other companies have tried but given up too quickly because it was simply easier to concentrate somewhere else. The Japanese have a right to criticize that, and so do we. But if that were the only problem, we could solve it quickly.''

Europe -- At the end of last year, US steel producers filed a series of suits with the federal government, charging the members of the European Community (and a few other countries) with selling steel in America at unfair low prices. The US International Trade Commission is weighing the merits of the cases.

''We've tried very hard to convince the Europeans that we're going to be absolutely fair in the quasi-judicial analysis we're making of the several cases filed,'' Mr. Brock said. ''The Europeans will be fair enough to admit there have been substantial subsidies in this area. Both international and domestic law prohibits the use of such subsidies when they result in injury to a trading partner.''

But steel is a politically sensitive issue in Europe. If the United States slaps on penalty duties, won't some kind of retaliation be inevitable?

''It's a little hazardous to speculate on what might happen. We've already thrown out half the cases. I think the matter is very serious, obviously. It's been very difficult for both sides.''

Corn gluten - An innocuous-sounding farm product, corn gluten is another ''very explosive'' EC-US issue, says Brock. Unable to unload piles of grain created by high farm subsidies, the EC is considering hanging tariffs on cheap livestock feed substitutes, with corn gluten being the first target.

''The competitive products in Europe are overpriced by action of their own governments,'' Mr. Brock claimed. ''They then come back and say we're the problem, instead of their own pricing policy.''

''The Europeans did agree to zero duty; if in fact a duty is imposed, that's a breaching of the agreement,'' Mr. Brock said, declining to elaborate on what specific retaliatory steps might be taken.

Stagnation in world trade -- This year's trade deficit is expected to roll in at $35 billion -- a new record. What's the root of the problem?

''The largest single factor in the plateauing of trade is the stagnation of world markets,'' he said, ''primarily in the industrial nations. The increase in the relative value of the dollar, and the decline in other currencies, means that our prices in relative terms have gone up. Other factors are considerably less important than those two.''

''It's going to be difficult to see a significant improvement in the trading picture until there is some general economic recovery - here, Europe, Japan, and elsewhere,'' Mr. Brock said.